Can you do the accounting for a limited company? The immediate response from most people would be a resounding “Absolutely not!” The thought of tackling receipts, paperwork, calculations, and taxes doesn’t bear thinking about. However, no legal restrictions prevent you from doing your limited company accounting.
If you have some prior accounting or bookkeeping experience and are confident in your ability to deal with your company’s finances, you may wish to do your own accounting. But if you’re at all unsure, you should appoint an accountant.
Limited company accounting can be complex. If you run a company, all business income, expenditures, assets, and liabilities must be accurately recorded, fully disclosed, and traceable at all times.
Your annual accounts must be ‘true and fair’, and you must keep all business records for at least six years from the end of the accounting period to which they relate. Your accounting records must reflect this and provide details of the following:
You will use these financial records to prepare full (‘statutory’) annual accounts, file Company Tax Returns, and pay Corporation Tax on all taxable income. If your company’s annual turnover exceeds the VAT registration threshold (currently £90,000), you must file VAT returns and pay VAT bills every quarter.
Company accounts are due every year, regardless of whether a company is active or dormant. You must file annual accounts with Companies House within 9 months of your accounting reference date (ARD). This is usually the anniversary of the last day of the month in which your company was registered.
Statutory accounts must adhere to either International Financial Reporting Standards or UK Generally Accepted Accounting Practices, and they should include the following:
Dormant companies are required to prepare dormant company accounts (balance sheet and notes) for Companies House. There is no need to file accounts with HMRC unless a company becomes dormant after a period of activity.
Your company’s accounting period will determine the deadlines for filing Company Tax Returns and paying Corporation Tax . This period usually begins when your business activities commence and ends on the company’s ARD.
Your Company Tax Return should be filed within 12 months of the end of the company’s financial year. HMRC requires all Company Tax Returns to be sent online. You must include form CT600, Corporation Tax calculations, and full statutory accounts.
You will be required to include information about capital allowances, gains on assets, directors’ loans, and any losses being carried forward from the previous accounting period.
HMRC will use all of this information to work out how much Corporation Tax your company owes. The deadline for paying Corporation Tax is 9 months and 1 day after the end of your company’s financial year. Be aware that the deadline for paying your tax bill falls before the deadline for filing your tax return.
If you possess the knowledge and aptitude to do your own accounting, you should be able to avoid any penalties. However, if you are in any doubt about your ability, we would urge you to use an accountant or tax adviser.
This may be an extra expense you’d rather avoid, but doing your own accounting can be a false economy if you don’t know what you’re doing.
Late annual accounts incur financial penalties from Companies House, ranging from £150–£1,500 for private companies. These fines will double if your accounts are late for two consecutive years. If you fail to file your accounts and make no effort to resolve the situation, you could be personally prosecuted and fined.
If you file your Company Tax Return late, HMRC will impose penalties ranging from £200 to 10% of any unpaid tax. Tax returns that are late 3 times in a row will incur a minimum fine of £1,000.
Think about the nature of your business: many accountants specialise in certain industries and professions, so looking for an accountant who understands the type of business you run is worthwhile.
For many small businesses, a big accountancy firm that deals with large corporations would be an unlikely choice. It would be better to engage an independent accountant who specialises in working with small businesses. This should ensure you receive equal treatment and don’t pay unreasonable rates.
Having a good relationship with your accountant is key. You need to trust them and their ability to do the job properly. It can be useful to ask friends and trusted acquaintances for recommendations, but don’t rely solely on someone else’s word – be sure to conduct independent research on any accountants you are considering.
Not all accountants require Chartered status; an accountant without these qualifications may be just as good. However, for your own peace of mind, it may be worth choosing one that has completed the rigorous professional training required by one of the following organisations:
If you use a Chartered Accountant, you can be sure their knowledge and training is up-to-date and closely monitored. If your company requires an audit, you will have to use a Chartered Accountant registered as an auditor.
Compare costs and fees of different accountants; don’t just go with the first one you find. If you are new to using the services of an accountant, you may not be aware of the costs. Take some time to get some quotes before making your decision. High prices do not always mean better service. Likewise, low costs do not always result in value for money.
Will you pay an accountant fixed monthly or variable fees as and when work is done? Many accountants offer different fee structures, so ask about payment options. If you choose a pay-as-you-go type of service, you can easily keep track of all of the work you are paying for. On the other hand, these costs could quickly mount up if you do not keep an eye on everything you are being charged for.
You may also save money by handling simple bookkeeping tasks and maintaining a record of your expenses. This could save your accountant a great deal of time and, in turn, you could save yourself some money.
Upon finding an accountant that you would like to use, arrange a meeting and prepare a list of questions to ask. Ensure you are aware of all of your obligations and are happy with the services offered. This initial meeting presents an opportunity to get to know the person you will be dealing with and make a more informed decision.
If you would like to be put in touch with a reputable accountant, we would be happy to help. Simply add ‘Introduction to an Accountant’ to your basket during the online company registration process.
Alternativley, contact our London-based team and we will endeavour to have a chartered accountant call or email you within 48 hours.